NEW YORK (Reuters) – The dollar edged higher against a basket of currencies on Monday as tumbling oil prices pressured oil-linked currencies and as investors awaited the outcome of a European Union summit this week on how to tackle economic fallout from the novel coronavirus crisis.
The U.S. Dollar Currency Index <=USD>, which measures the greenback’s strength against six major currencies, was up 0.07% at 99.912.
The index has pulled back from the three-year high of 102.97 hit in mid-March as the rapid deployment of monetary stimulus measures by the U.S. Federal Reserve eased the strain on dollar funding.
Caution recaptured world markets as a drubbing for U.S. WTI crude oil kicked off a busy week of data and earnings that will drive home the damage being inflicted by global coronavirus lockdowns.
The sharp drop in oil prices was boosting the buck’s appeal as a safe-haven, said Juan Perez, senior currency trader at Tempus Inc in Washington.
“This is the ultimate manifestation of economic inactivity,” Perez said.
Oil-linked currencies were weaker with the U.S. dollar 0.84% higher against its Canadian counterpart, while the Mexican peso lost about 2.1% against the greenback.
Perez, however, said further weakness for the two currencies might be limited.
A measure of dollar positioning <NETUSDALL=> derived from net positions of International Monetary Market speculators in 10 major currencies, including the yen and the euro, posted a net short position valued at $10.52 billion, up from $9.73 billion a week earlier.
Investors will be watching for signs of progress as heads of European Union governments are scheduled to hold a video summit over how to tackle the economic fallout from the crisis on Thursday, where differing views on coronabonds, mostly demanded by southern EU member states, are expected to be voiced.
Expectations were low that participants would signal a united front, which could pressure the euro in the short term, analysts said.
The euro was about flat against the greenback.
The New Zealand dollar <NZD=D3> held its own against the greenback, rising 0.4% after the country said it will lower its alert level one notch next Monday – allowing some businesses to resume – and review that stance on May 1.
The economic impact of the enforced lockdown will be evident from data later this week where flash PMI data for April will be released.
(Reporting by Saqib Iqbal Ahmed; Editing by David Gregorio and Chizu Nomiyama)